Universal Display Corporation

Good day, ladies and gentlemen, and welcome to Universal Display Corporation's second quarter 2022 earnings conference call. My name is Sheri, and I will be your conference moderator for today's call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Darice Liu, Senior Director of Investor Relations. Please proceed.

Thank you, and good afternoon, everyone. Welcome to Universal Display's second quarter earnings conference call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer, and Sid Rosenblatt, Executive Vice President and Chief Financial Officer. Before Steve begins, Let me remind you that today's call is a property of Universal Display. Any redistribution, retransmission, or rebroadcast of any portion of this call in any form without the express written consent of Universal Display is strictly prohibited. Further, this call is being webcast live and will be made available for a period of time on Universal Display's website. This call contains time-sensitive information that is accurate. only as of the date of the live webcast of this call, August 4, 2022. During this call, we may make forward-looking statements based on current expectations. These statements are subject to a number of significant risks and uncertainties, and our actual results may differ materially. These risks and uncertainties are discussed in the company's periodic reports filed with the SEC and should be referenced by anyone considering making any investments in the company's securities. Universal Display disclaims any obligation to update any of these statements. Now, I would like to turn the call over to Steve Abramson.

Thanks, Darius, and welcome to everyone on today's call. Before we delve into our second quarter results and the OLED industry, I want to take a moment to discuss the leadership transition that we announced this afternoon. Following an exceptionally impressive and remarkable 26 years with Universal Display Corporation, Sid will be retiring from the company at the end of this year. Under his leadership, Sid helped transform UDC from a three-person startup to a profitable world-class operation, played a critical role in establishing and fostering the robust corporate culture that makes UDC who we are, and helped steer our path of growth and success. On behalf of the board, the management team, and our colleagues at UDC, I would like to thank Sid for his extraordinary service, steadfast commitment, and immeasurable contributions to the company. On a personal note, I am grateful for the 46 years of friendship and close business collaborations. In 1976, when many of you were probably not yet born, Sid and I met at Temple Law School. In 1982, we both joined one of Sherwood's earlier startups called International Mobile Machines Corporation, or IMM, which helped invent digital cellular radio. In 1996, we again joined Sherwood to help revolutionize the electronic display industry with a relatively unknown technology called OLEDs, at a time when CRTs were still the mainstream display technology in the market. Fast forward to today, and UDC is a pioneer and a leader in the OLED ecosystem. We have strong customer partnerships, a lean and profitable operating model, and are continuously growing our portfolio of state-of-the-art technologies and materials, expanding our presence around the world, and fortifying our robust framework for growth, in all of which Sid has been instrumental. Don't worry, though. Sid is not leaving the UDC family. He will remain on the Board of Directors and continue to share his valuable insights and guidance. On behalf of the entire company, I would like to wish Sid a happy, healthy, and well-deserved retirement. We are excited to announce that Brian Millard has been appointed Chief Financial Officer effective September 6, 2022. Brian will be an excellent addition to the executive team to help spearhead UDC to new heights of opportunity and growth. Brian joined UDC with a wealth of experience across several industries. He has a strong background with more than 15 years of deep financial, operational, and strategic experience. He was most recently Senior Vice President of Finance and Corporate Controller at Emergent Biosolutions. His prior experience traversed large multinational corporations, including Hertz Global and Hilton Worldwide. Brian will help nurture and enhance UDC's collaborative culture of inventiveness, integrity, inclusion, and imagination that makes UDC a unique growth company. On behalf of the entire company, I welcome Brian to UDC. Now to our results. Our second quarter 2022 revenue was $136.6 million. Operating profit was $53.3 million. And net income was $41.5 million. or 87 cents per diluted share. Our second quarter started off with a solid note, but as we approached the summer, customers lowered their forecasts. Given the downward trend in forecast revisions and increasing macro uncertainty and volatility, we are revising our 2022 revenue forecast to approximately $600 million plus or minus $10 million. While near-term headwinds are expected to continue weighing on the economy, and impacting consumer spending, positive long-term momentum in our OLED pipeline continues. OLED industry roadmaps continue to expand, and as the evolution of the OLED market continues to advance, so are we. As a lean operating company with a strong balance sheet and no debt, we are well-positioned to continue investing in our long-term growth strategies. We are investing in our people, our technologies, our materials, and our infrastructure to reinforce our first mover advantage, expand our materials and technologies portfolio, and broaden our support to customers and the OLED industry. As we look out, we believe that 2024 is shaping up to be a pivotal year for the OLED industry and for us. From an industry perspective, a significant new wave of Gen 6 and Gen 8.5 OLED capacity plans are reportedly in the works as panel makers advance product roadmap plans for medium and large area OLED adoption. As OEM activity for OLED IT and OLED TV products continue to grow, there are recent reports that Samsung, LG Display, BOE, Tienma, China Star, and Visionox are all reviewing new investment plans. This new wave of capacity builds is expected to drive significant growth and momentum in the OLED industry and for us. In addition to capital investment plans, panel makers are working on technologies such as LTPO backplane and tandem OLED material structures to prepare for the OLED IT wave. At the same time, we are continuing to build upon and expand our core competencies. We are innovating, inventing, and introducing new OLED phosphorescent emissive materials with continuous improved performance to achieve our customer specifications, including next generation's reds, greens, yellows, and hosts. With respect to blue, we continue to make excellent progress in our ongoing development work for a commercial phosphorescent blue emissive system. We continue to believe that we are on track to meet preliminary target specs with our phosphorescent blue by year-end, which should enable the introduction of our all-phosphorescent RGB stack into the commercial market in 2024. We believe that the commercial introduction of our full-color emissive stack will unlock a vast array of opportunities for higher energy efficiency and higher performance across a broad range of OLED applications. Another important component to support growth and our customers is the development of groundbreaking technologies that solve significant industry challenges and help advance the OLED market. For decades, the OLED industry has sought a manufacturing process for side-by-side RGB OLED TVs to pattern the pixels across a Gen 8.5 plus mother glass. This is the industry challenge and opportunity that we are taking on with OVJP. We are steadily making progress with constructing the key subsystems of our alpha system design for our trailblazing manufacturing printing platform. In May, our Silicon Valley team printed our first Gen 4 panel using 10 OBJP print nozzles and our phosphorescent red emitter materials. While still a few years away, we believe that OBJP will pave the path for high-value manufacturing large area RGB OLED TV panels and develop into a multi-billion dollar market opportunity. These R&D programs bolster our global OLED intellectual property framework while increasing our value proposition in the ecosystem. These initiatives also reinforce our strategic priorities to widen our reach, expand our business, and drive profitable long-term growth. On that note, And for the last time in more than a decade of earnings conference calls, let me turn the call over to Sid.